MomentumOptionsTrading.com Morning Update for 5/21/14
Bears Growl as VIX Clears 12.50
The bears are starting to get their groove on Tuesday’s after holding resistance and getting a clean sweep on the major indexes. I often say one day doesn’t make a trend but I warned yesterday and today’s action could lead to something.
The Dow tanked 137 points, or 0.8%, to close at 16,374. The blue-chips traded to a high of 16,511 and into the resistance zone at 16,500-16,600 before fading to test support at 16,400-16,350. The bears pushed a low of 16,341 and held the 50-day MA in the process. I have been warning a close below 16,350 will likely lead to 16,200-16,000.
The S&P sank a dozen points, or 0.7%, to settle at 1,872. The index traded in negative territory throughout the session and touched a low of 1,868. The drop below 1,875 again was bearish but the bulls have wiggle room down to 1,868 (50-day MA) and then 1,860-1,850. A close below the latter would be extremely bearish.
The Nasdaq declined 29 points, or 0.7%, to end at 4,096. The bulls struggled at the start and tried to come up for air around lunchtime but the bears held Tech underwater into the close. The low checked-in at 4,080 with support holding at 4,075. A break below this level could lead to 4,050-4,000 and a test to the 200-day MA.
The Russell 2000 fell a sweet 16, or 1.5%, to finish at 1,097. The close back below 1,100 reopens the trap door to 1,075. Monday’s failed attempt to clear the 200-day MA at 1,117 was a good tell a test to support could come but it is too early to get excited until 1,082 is taken out on the close.
The S&P 500 Volatility Index ($VIX, 12.96, up 0.54) popped 4% after the bears reclaimed the 12.50 level. The VIX reached a peak of 13.30 and the next level of importance is at 13.50. A close above this level gets 15 in play.
Ahead of the open, futures look like this: Dow (+40); S&P 500 (*3); Nasdaq 100 (+10).
Our current trades got some nice pin action yesterday so let’s go check the tape inside the Members Area.